The Commission of Inquiry into the Earthquake Commission should be underway shortly with a focus on lessons learned from the Canterbury and Kaikōura earthquakes.
Putting customers at the centre of reform should be the objective. Simple, straightforward and efficient claims management that expedites recovery and supports a high-level of protection would be sensible outcomes.
Maintaining EQC cover for first loss on a flat levy basis supports affordable private cover and minimises the protection gap. So, no change needed there.
Efficient claims management for customers starts with a single entity being responsible and accountable to manage claims. This would eliminate multiple handling of claims and create one point of contact for all information and communications. It would achieve consistency in approach by removing different parties with different systems managing the same claim as happens when EQC transfers over cap claims to insurers.
By having a single entity responsible for claims management, it will significantly cut the scope for multiple legal, engineering and geotech experts being brought into the process representing EQC and insurers. That will reduce the scope for disputes and delays, create efficiency and reduce costs.
It is hard to mount even a weak case for EQC to be the single, claims management entity. First, the Government has no liability for private insurance claims. Nor does EQC have knowledge of the multiple insurance policies available in the market. Nor does the customer have any relationship with EQC prior to an event.
On the other hand, it is the private insurer’s policy the customer chooses as opposed to an Act of Parliament, which is EQC’s de facto insurance policy. If EQC cover followed the private insurer’s policy, that choice and the expectations of reinstatement would be preserved and potential for disputes over two standards of reinstatement would be eliminated because only one assessment would be required. Such an approach has obvious added advantages if insurers managed both under- and over cap claims.
Putting the customer first supports a private insurer-managed claims process. Private insurers hold historical information on their customers’ properties and have detailed knowledge of the policies and how they respond. They have every incentive in a competitive market to resolve claims as efficiently as possible for their customers, a dynamic that a state-owned monopoly does not experience.
The removal of EQC cover from contents will mean that private insurers will manage these claims after an event for the same people making claims for damage to their house. Surely, at that point, the customer would want only one entity managing both sets of claims?
Collectively, insurers manage thousands of claims a day, operating 24/7. This claims response capability is compared to the 5,000-10,000 claims EQC managed annually prior to Canterbury.
The response to the 2016 Kaikōura earthquake saw insurers acting as EQC’s agents, managing and settling all house and contents claims from the ground up. In just over 12 months, over 90% of all domestic claims were settled or partially settled, a proof point for future direction.
Certainty and clarity about who carries responsibility for managing claims are needed before events occur. That gives confidence to invest in the systems to enable quality data sharing with EQC to speed recovery. Ad hoc decisions by EQC post-event are not the way to go.
Ideally, insurers should be mandated to manage and settle claims for EQC. In this way, the most severely damaged properties would be known to insurers from the outset, not years later as occurred in Canterbury, making for faster recovery. Such arrangements should be on a commercial basis and agreed in advance.